Unitil requests unusual midwinter rate hike for Mainers

The extreme cold and high demand that have been pushing up energy prices across the country are about to hit customers of Maine’s largest natural gas company: Unitil Corp. is asking state regulators for an unusual winter rate hike.

Unitil wants to add roughly 27 cents across the board to the rate that the Maine Public Utilities Commission approved last fall for gas this winter. For a typical home that’s heated with gas and burns 594 hundred-cubic-feet per winter, the proposal would translate into a 10.4 percent increase. It would add $87.19 to an average winter cost of $924. Business use varies greatly and big companies that buy gas from third-party suppliers wouldn’t be affected.

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In this Jan. 8, 2014 file photo, homes are covered in snow and ice. The extreme cold and high demand that have been pushing up energy prices across the country are about to hit customers of Maine’s largest natural gas company: Unitil Corp. is asking state regulators for an unusual winter rate hike. AP Photo/Kiichiro Sato

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The PUC is expected to rule on the request Feb. 4. It’s not clear exactly when any rate hike would go into effect, but Unitil wants it to cover a period beginning Feb. 1. The new rate would run until April 30, when the heating season ends.

Maine has three other gas companies regulated by the PUC: Maine Natural Gas, Summit Natural Gas and Bangor Gas. Maine Natural and Bangor, which are much smaller than Unitil, calculate rates for most customers on a monthly basis.

Rates at Bangor Gas will change next week based on commodity prices, but it’s too early to say what they will be, said Andrew Barrowman, the sales and marketing manager.

“The way prices have been for the month of January, we expect it will rise,” he said.

Maine Natural Gas said Monday that it had locked in the price for its basic supply needs and wouldn’t be raising rates in February. Maine’s newest gas company, Summit Natural Gas, has initial rates in place for a year, according to the PUC.

Any rate change at Unitil would affect 19,350 home customers and 9,400 businesses, mainly in Greater Portland and the Lewiston-Auburn area.

Each fall, the PUC approves natural gas rates for the coming winter. Utilities are allowed to pass through the cost of the fuel they estimate they will need to serve their customers.

Unitil calculates its fuel costs based on the contracts it signs. But to hedge its bets, it also buys some gas on commodities markets.

This year, the bitter cold has sent prices skyward for gas that’s earmarked for delivery later this winter.

Unitil says if it doesn’t get approval to make up the difference, it will be short $3.3 million.

SOME CUSTOMERS DISMAYED

Some Unitil customers are not happy about getting hit with a rate increase in the middle of the winter heating season.

Margo and Marc Badeau own and operate Top Shelf Collectibles out of a 5,000-square-foot space in the Gorham Industrial Park. The couple, who have no other employees, were not aware that Unitil was seeking a winter rate hike until contacted by a reporter.

Earlier this month, the Badeaus were informed that their base monthly rate for natural gas was being increased from $17.42 to $35.30. Marc Badeau said Unitil’s customer service department told him that the base rate covers personnel and other internal company costs, but does not include the price charged for gas usage.

They were not happy about the base rate increase, and were angered to learn Monday night that their natural gas bill might be going up again.

“It’s devastating. I just don’t understand how an increase like this can happen,” Margo Badeau said.

“It’s just mind-boggling,” her husband said. “In this climate, where small businesses are struggling to make ends meet, it seems like Unitil is taking advantage of the situation (extremely cold weather).”

Spokesman Robert Caswell said the University of Southern Maine, which heats more than 50 buildings on its Gorham and Portland campuses with a combination of natural gas and heating oil, is a Unitil customer. Caswell said Monday night that the university would not look favorably on any proposed rate increase.

Though USM has the ability to switch between heating with gas or oil – usage depends on current pricing – Caswell said that on average in winter, the university will consume more than 5,000 gallons of oil or the equivalent amount of natural gas during a 24-hour period.

“Given the extreme cold and the heating conditions we’ve had to face, any increase in gas prices would really hurt our heating budget,” he said. “Like everyone else, it has been a tough heating season.”

Steve DiMillo, a manager at DiMillo’s restaurant on Portland’s waterfront, said his business uses natural gas to heat the restaurant and for cooking. The restaurant has a fixed-price contract with Unitil that protects it from price fluctuations through November of this year, DiMillo said.

“We do use a lot of gas here,” he said. DiMillo was unable to provide specifics but said he likes natural gas.

In addition to the restaurant, DiMillo said he heats his “drafty” Portland home with natural gas.

The proposed rate increase does not bother him.“It’s better than having to buy oil,” he said.

AN UNUSUAL REQUEST TO PUC

Asking the PUC for a midwinter adjustment is unusual. It’s a first for Unitil, which bought the former Northern Utilities in 2008.

“Generally speaking, the rate increase has to be at least 6 percent to take this kind of action,” said Harry Lanphear, a PUC spokesman.

Despite the proposed rate hike, natural gas still remains among the least expensive heating fuels in Maine, according to the Governor’s Energy Office. On a per-unit basis, it’s still half the price of heating oil at $3.80 a gallon.

The impact of rising wholesale gas prices also will be felt by home and small-business electric customers that get their power supply from Maine’s standard offer. Last week, the PUC approved competitive bids for Central Maine Power Co. and Emera Maine-Bangor Hydro Division customers that will raise residential rates nearly 11 percent and 13 percent, respectively. The rates take effect in March. Half the power generated in New England now comes from plants that burn natural gas. The PUC said the standard offer bids tracked market conditions that reflect the strong demand for gas and inadequate pipeline capacity.

Unitil’s calculations are being reviewed by the PUC staff and the Office of Public Advocate.

“We are going to be looking to make sure this undercollection isn’t something that the company should just shoulder in the normal course of doing business,” said Tim Schneider, the public advocate.

If the full rate hike is approved, customers will receive a message in their bills. They actually will be paying 8 percent less, on average, than they did last winter, said Alec O’Meara, a Unitil spokesman. “While this is an increase from the current supply cost,” he pointed out, “the market cost of natural gas for our customers started at a much lower point this winter than it did last winter.”

The cost of gas for a home heating customer currently is nearly 82 cents per hundred-cubic-feet. The adjustment would change it to $1.09.

That may be true, Schneider said, but that’s not the way his office compares rate requests.

“We’re looking for them to get the lowest costs for commodities that they can,” he said.

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